“Anticipation Builds as Reserve Bank of India Prepares for February 2024 Monetary Policy Decision”
All eyes are on the Reserve Bank of India (RBI) as it gears up to announce its Monetary Policy decision on February 8, 2024. While market analysts widely anticipate the central bank to maintain the status quo in terms of broad policy rates, the focus remains squarely on the liquidity situation and its potential impact on monetary policy.
Amidst a backdrop of tighter liquidity conditions, there is speculation about the possibility of easing measures. However, concerns persist regarding inflation, which has remained stubbornly above the RBI’s target of 4%. This has led many experts to advocate for a cautious approach by the central bank.
Devendra Kumar Pant, Chief Economist and Head of Public Finance at India Ratings & Research, anticipates the RBI to maintain status quo on policy rates. He highlights the tight liquidity conditions, with the weighted average call money rate (WACR) hovering around the upper end of the LAF corridor. Pant underscores the likelihood of continued tight liquidity conditions in March 2024, driven by advance tax and GST outflows. Despite arguments for easing, Pant emphasizes the importance of RBI’s cautious approach, especially in light of persistently high inflation expectations.
Saurav Anand, Economist-South Asia at Standard Chartered Bank India, echoes similar sentiments, expecting the RBI to maintain status quo and uphold its “withdrawal of accommodation” stance. Anand emphasizes the importance of MPC commentary amidst ongoing geopolitical uncertainty and frequent food-price shocks. While anticipating a continued downtrend in headline CPI, Anand suggests that the MPC is unlikely to adopt an outright dovish tone. Instead, he expects the central bank to maintain its inflation and GDP forecasts for FY25, with a keen eye on the Q4-FY25 inflation forecast to assess the real rate trajectory.
As anticipation mounts ahead of the RBI’s Monetary Policy decision, market participants eagerly await insights into the central bank’s approach amidst evolving economic conditions and inflationary pressures. The decision will not only shape the trajectory of monetary policy in the near term but also provide valuable insights into the RBI’s outlook for the broader economy.